Developing and Pricing the Prius

Takeshi Uchiyamada, chairman of Toyota Motor Corp., was the team leader of the group that created the Prius. In a speech to the Economic Club of Washington last month, he recalled that in 1993, the team proposed that they develop a vehicle that would get 1.5 times better fuel economy than then-existing models.

Uchiyamada recalled, “We thought that was extremely ambitious. But top management told us, ‘Double it. You are not being ambitious enough. You should think about the century ahead.’ So, we had to give up the ‘possible’ target, and try to achieve the ‘ideal’ target. This was major pressure, the most intense I had ever expected.”

Prius Plug-in

By December 1997, they launched the Prius. And since that time, they’ve sold more than 3 million of the vehicles around the world.

Toyota is working on the fourth-generation Prius. Uchiyamada said, “In each of the previous moves to a new generation, we achieved a 10% increase in mileage per gallon. We are committed to beating that record this time.”

The first-generation Prius had a combined EPA rating of 41 mpg. The second 46 mpg. And the current gen, 50 mpg. That’s for the Prius liftback, the model that started it all.

There’s the Prius Plug-in, which also has combined mileage of 50 mpg, but as a plug in, it can run purely on electricity, at it has an EPA rating of 95 mpge for that. The estimated range on electricity alone is 11 miles, and the vehicle can travel at up to 62 mpg in electric mode.

Uchiyamada stated in Washington, “Some people say hybrid vehicles such as the Prius are only a bridge to the future. But we think it could be a long bridge and a very sturdy one.”

And to help build that bridge, it isn’t just about creating better hybrids, but about building a stronger market.

So last week Toyota announced that it was cutting the base price of the 2014 Prius Plug-in by $2,010, so that it has a starting MSRP of $29,990, or a 6.3% decrease in price without a decrease in content.

From a percentage basis, they’re reducing the MSRP of the Prius Plug-in Advanced model (it is, in effect, the loaded version) by 11.7%, to $34,905.

In addition to which, there are all manner of federal and state credits and stickers and whatnot available.

Some might say that this is a move meant to move more vehicles in order to meet California’s Zero Emissions Vehicle regulation. No doubt, that is a part of the reason for the price reduction.

But there is probably more to it.

Listen to Uchiyamada about the early days:

“We studied 80 different types of hybrid systems, and finally chose the so-called ‘series parallel’ system. This would enable a vehicle to run only on the gasoline engine, only on the electric motor, or on a combination of both, depending on driving conditions. Overall fuel consumption and environmental protection would be optimized.

“When we showed the first concept model at the Tokyo Motor Show in the fall of 1995, we failed to make the prototype actually function. Can you imagine the agony we endured? For 49 days in November through December, the car did not move an inch. I could not sleep very well during that period. Finally, near the end of the year, we got the car to run--but only for 500 meters!

“We kept developing the vehicle and reached the launch goal in December 1997.”

I think that the company is simply serious about helping the technology proliferate. Sure, that’s beneficial to its bottom line, but it is also beneficial from the standpoint of advancing technology in the industry—to say nothing of the benefits vis-à-vis the high efficiency of the products.